California Expands the Cartwright Act: COMPETE Act Creates New State-Law Prohibitions on Single-Company Monopolization

At a Glance

• Companies with substantial market power in any market, including labor markets, should not rely on federal case law alone, particularly for loyalty discounts, tying, self-preferencing, and exclusive dealing arrangements.
• Employers and large purchasers should evaluate wage-setting practices, nonsolicitation agreements, and supplier terms that could acquire or maintain buyer-side market power through exclusionary conduct, given the COMPETE Act's express coverage of buyer-side power and its stated purpose of protecting competition for workers.
• Expand policies and training to address unilateral conduct, with particular attention to sales, pricing, procurement, and HR personnel.
• Determine whether a combined company could have "substantial market power" in a market that reaches California customers, suppliers, or workers, and, during diligence, review whether a target's single-firm practices could create post-closing risk.

On September 30, 2026, Governor Gavin Newsom signed Assembly Bill 1776, the Competition and Opportunity in Markets for a Prosperous, Equitable, and Transparent Economy Act (COMPETE Act), into law. The COMPETE Act expands California's century-old Cartwright Act to expressly prohibit certain anticompetitive single-firm conduct, including monopolization and monopsonization (the buyer-side counterpart to monopolization).

Beginning January 1, 2027, California antitrust law will reach monopolistic conduct by a single company — conduct that is now generally reachable only under federal antitrust law and, in narrow cases, under California's Unfair Competition Law. Under the new law, the California attorney general and district attorneys may bring enforcement actions against such conduct. Companies that may have substantial market power in a market that reaches California customers, suppliers, or workers should consider reviewing their unilateral business practices before the law takes effect.

A Century of California Antitrust Law

California enacted the Cartwright Act in 1907, seventeen years after Congress passed the Sherman Act. The statute protects competition in California markets by prohibiting combinations and agreements that restrain trade, limit production, fix prices, or prevent competition.

Unlike Section 2 of the federal Sherman Act, which prohibits monopolization, attempted monopolization, and conspiracy to monopolize, the Cartwright Act has always required concerted action — a combination of "two or more persons." As a result, single-firm conduct has largely been policed under federal law. California courts hold that single-firm monopolization is not cognizable under the Cartwright Act. See State ex rel. Van de Kamp v. Texaco, 46 Cal. 3d 1147 (1988).

What the COMPETE Act Changes

The COMPETE Act extends California's antitrust framework to reach monopolization and monopsonization, attempts to monopolize or monopsonize, maintenance of a monopoly or monopsony, and combinations or conspiracies to monopolize or monopsonize. As a result, the California attorney general and district attorneys may challenge certain unilateral conduct by a dominant firm without showing that it entered into an unlawful agreement with another company. And by prohibiting monopsonization, the statute can reach conduct involving a firm's buyer power over suppliers, workers, or others from whom it purchases goods or services. The legislation specifically recognizes competition in labor markets and identifies workers' freedom to choose employment as an aspect of competition.

But the COMPETE Act is not simply a California version of Section 2. It specifically states that "federal antitrust laws are at most instructive" and instructs courts to "liberally interpret California's antitrust laws to best promote free and fair competition." Critics initially warned of the bill's departure from federal principles, calling it "senseless and unworkable" and decrying it as introducing further uncertainty into an already complex scheme. The version of the bill signed has been narrowed to remove some of the more controversial provisions (e.g., a stand-alone prohibition on unilateral restraints of trade and a private right of action), causing proponents of the bill to condemn its departure from the California Law Revision Commission's final recommendation earlier this year.

The enacted bill requires the attorney general or district attorneys to allege and prove "substantial market power, either through direct or indirect evidence" when bringing enforcement actions, but does not define that standard. Whether it is lower than the "monopoly power" required under federal law is likely to be contested. In his signing message, Governor Newsom stated that substantial market power should be understood as a necessary — but not sufficient — condition to prove unlawful conduct and observed that additional legislation may be required to clarify the appropriate standards. The Act also directs courts to use the analytical framework described by the California Supreme Court in In re Cipro Cases I & II, 61 Cal. 4th 116, 146–47 (2015), and affirms that a business may lawfully obtain and maintain market power through the superiority of its products, services, or business acumen. In practice, California courts will have substantial room to develop their own rules for single-firm conduct, and practices that are lawful under federal law could still be challenged in California.

Violations are subject to the Cartwright Act's existing civil enforcement mechanisms, including civil penalties of up to $1 million per violation and injunctive relief. Because the new provisions create no private right of action, treble damages and attorneys’ fees are not available. Whether the Cartwright Act’s criminal penalty provisions extend to the new single-firm conduct provisions remains unsettled.

Enforcement Limits and Exemptions

Reflecting its compromise between expansion and unbridled enforcement, the COMPETE Act includes the following restraints:

• No Private Right of Action: Only the California attorney general and district attorneys may bring actions under the new single-firm conduct provisions. Competitors, customers, and consumers cannot sue under these provisions, although the Cartwright Act's existing private right of action for concerted conduct remains in place. Additionally, subject to limited exceptions, private plaintiffs cannot use violations of the COMPETE Act's provisions as a predicate for a claim under the Unfair Competition Law.
• Small Businesses: The new provisions do not apply to independently owned and operated businesses whose principal office is located in California, whose officers are domiciled in California, and which, together with affiliates, have 100 or fewer employees and average annual gross receipts of $10 million or less over the three years before the filing of the complaint.
• Government-Authorized Conduct: The new provisions do not apply to exclusive franchises, contracts, licenses, permits, and other conduct granted and supervised by local, state, or federal government entities.

Practical Considerations for Businesses

1. Reassess unilateral practices.

   Companies with substantial market power in any market, including labor markets, should not rely on federal case law alone, particularly for loyalty discounts, tying, self-preferencing, and exclusive dealing arrangements. Some of these practices involve agreements already reachable under the Cartwright Act; the key change is that they may now be challenged when imposed unilaterally, without proof of an agreement. Even practices likely lawful under federal law may present risk under the COMPETE Act, particularly while its governing principles are being developed in the courts. Companies headquartered outside California should not assume they are outside the law's reach if their conduct affects California consumers, suppliers, or workers.

2. Account for monopsony.

   Employers and large purchasers should evaluate wage-setting practices, nonsolicitation agreements, and supplier terms that could acquire or maintain substantial buyer-side power through exclusionary conduct, given the COMPETE Act's express coverage of buyer-side power and its stated purpose of protecting competition for workers.

3. Document procompetitive justifications.

   Contemporaneous business records explaining the efficiency rationale for pricing and distribution decisions will be central to any defense, particularly because the Act’s Cipro framework shifts the burden to the defendant to show procompetitive benefits once anticompetitive effects are shown, and because the Act preserves market power obtained through superior products, services, or business acumen.

4. Prepare for investigations.

   Because only the attorney general and district attorneys may enforce the new provisions, companies should review their business practices from the perspective of California enforcers and have a plan in place for responding to government information requests.

5. Update compliance policies and training.

   Expand policies and training to address unilateral conduct, with particular attention to sales, pricing, procurement, and HR personnel. Practical steps include establishing legal review for loyalty discounts, exclusivity terms, bundling, and refusals to deal; reviewing standard employment terms such as nonsolicitation, training repayment, and exit-fee provisions; and training employees on internal descriptions of market position.

6. Plan litigation strategy.

   Companies facing an investigation or enforcement action should anticipate disputes over how courts will define and apply "substantial market power" and how they will apply the Cipro framework to unilateral conduct.

7. Consider deal strategy.

   Determine whether a combined company could have "substantial market power" in a market that reaches California customers, suppliers, or workers, and, during diligence, review whether a target's single-firm practices could create post-closing risk.